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THE ECONOMIC WEEKLY

A u g u s t 2 7 , 1960

Rural Industrialisation
Its Pattern and Problems
MCS
RURAL i n d u s t r i a l i s a t i o n i s general- (5) S t i m u l a t i o n of local savings p a r t l y because recent technological
ly regarded as an essential and and capital f o r m a t i o n and i n - developments have f r e e d them f r o m
inseparable o b j e c t i v e of developmen- culcation of a s p i r i t of indus- the t r a d i t i o n a l l o c a t i o n a l "pulls" and
tal endeavours in the c o u n t r y . This t r i a l i n i t i a t i v e i n r u r a l areas. p a r t l y also because the m a r g i n a l cost
unanimity o f o p i n i o n does not,
Objective ( 1 ) lakes f o r g r a n t e d i n v o l v e d in the creation of some of
however, extend either to the speci-
the i m p o r t a n c e of a balanced pat- the i m p o r t a n t "missing' overhead
fic issues sought to be solved or to
tern o f i n d u s t r i a l g r o w t h . I t em- facilities is l i k e l y to be matched by
the suggested methods of accompli-
phasises iht* need of providing marginal returns, both f r o m the
s h i n g the process. Besides, there is
requisite facilities as almost a pre- angle of society a n d of the p r i v a t e
no agreement on the a p p r o p r i a t e
c o n d i t i o n f o r the successful accom- entrepreneur. ' R u r a l i s a t i o n of large-
p a t t e r n of the p r o g r a m m e nor ade-
plishment of the process. It also scale units, which it ultimately
quate a p p r e c i a t i o n of the various amounts to, may be a desirable ob-
focuses attention on the i n c r e a s i n g
problems likely to arise in its jective in other spheres, b u t may
social cost of a g g l o m e r a t i o n . As
i m p l e m e n t a t i o n . T h i s note attempts, not be h e l p f u l in p r o m o t i n g the
a e o r o l l o r y to t h i s may also be a d d -
in the l i g h t of the f o l l o w i n g discus- over-all objectives of r u r a l indus-
ed the l i k e l y social cost involved in
sion on objectives a n d p r o b l e m s , to trialisation. S p e c i f i c a l l y , they m a y
the creation of the necessary pre-
suggest the outlines of a pattern of requisites f o r i n d u s t r i a l g r o w t h at neither help relieve r u r a l u n e m p l o y -
rural industrialisation. dispersed centres. ment ( o f any d e s c r i p t i o n ) d i r e c t l y
T h e objectives o f r u r a l i n d u s t r i a - a n d t a n g i b l y nor c o n t r i b u t e to the
W h e n related to a specific area,
l i s a t i o n are m a n y and v a r i o u s l y r u r a l ' n a t i o n a l ' income. Illustrative
the concept of ' r e g i o n a l l y balanced
defined ; p r o m o t i o n of decentralisa- instances are not l a c k i n g . B a n g a l o r e
i n d u s t r i a l g r o w t h ' can be i d e n t i f i e d
tion and balanced i n d u s t r i a l g r o w t h , d i s t r i c t , f o r instance, is the venue of
w i t h the p o l i c y of dispersal. There
removal of economic i n e q u a l i t y ; several large-scale u n d e r t a k i n g s in
is a genera! misconception about the
d e v o l u t i o n of social and p o l i t i c a l the p u b l i c sector. B u t no v i s i b l e
process of dispersal and the p r o m o -
power; eradication of rural un- i m p a c t o f t h e i r location i n the area
tion of small-scale industries at
employment and under-employment; is noticeable, either in terms of the
these dispersed centres. In other
establishment of an a g r o - i n d u s t r i a l employment opportunities afforded
words, small-scale industries are
base f o r the i n t e g r a t e d development to the local people or in the p r o m o -
sought to be located in dispersed
of r u r a l a n d u r b | n areas, etc. No tion of a n c i l l a r y units.
centres and thus expected to create
one can q u a r r e l w i t h these objec- new employment opportunities in
T h i s somewhat anomalous situa-
tives. They are, however, rather the dispersed r u r a l tracts, e x p l o i t i n g
g e n e r a l , if ' n o t vague. As a f r a m e - tion may be r e c t i f i e d if the process
as it were, local raw m a t e r i a l s and
w o r k f o r discussion, these objectives of dispersal is preceded by an ener-
catering f o r a l o c a l m a r k e t , thus
may be presented explicitly as getic p r o g r a m m e f o r e n s u r i n g the
ultimately r e d u c i n g the e x i s t i n g eco-
follows : requisite external economies and
n o m i c d i s p a r i t i e s a n d also the one-
market advantages at these centres.
(1) Involution of a balanced way How of p o p u l a t i o n to urban
The role of I n d u s t r i a l Estates spon-
p a t t e r n of location of indus- i n d u s t r i a l pockets.
sored by the G o v e r n m e n t of I n d i a
try by p r o v i d i n g facilities FACTOR ENDOWMENT in this respect needs to be studied
f o r i n d u s t r i a l g r o w t h at dis- Successful dispersal of i n d u s t r i a l and analysed, t h o u g h the way these
persed centres, thus sealing location depends on the factor- Estates have tended to be located in
d o w n tlie increasing social endowmeiu situation embracing mu- or nearabout e x i s t i n g cities suggests
costs of excessive urbanisa- t u a l l y s u p p o r t i n g "matrices' of acti- that even this p r o g r a m m e has not
tion. v i t y such as the p r o m p t a v a i l a b i l i t y successfully got over the influence
(2) C r e a t i o n o f new e m p l o y m e n t of the t r a d i t i o n a l locational ' p u l l s ' .
of a variety of l a b o u r skills, p r o x i -
o p p o r t u n i t i e s in areas of ex- m i t y of s u b c o n t r a c t i n g services and COST OF DISPERSAL
tensive or permanent un- suppliers, and f a c i l i t i e s of t r a n s p o r t ,
employment. m a r k e t i n g centres a n d sources of T h o u g h f r e q u e n t m e n t i o n is made
raw materials. T h e l o g i c of indus- of the social cost of u r b a n conges-
(3) Fuller utilisation o f under-
t r i a l units h e r d i n g themselves i n t i o n , rarely is this cost sought to be
utilised resources, i n c l u d i n g
existing centres of i n d u s t r i a l agglo- weighed against the l i k e l y social
industrial raw materials,
cost i n v o l v e d in the c r e a t i o n of these
manpower and electricity. m e r a t i o n is thus largely e x p l a i n e d .
very 'agglomeration' facilities at
Dispersal against this b a c k g r o u n d
(4) I n i t i a t i o n of a process of dispersed centres. These relate not
o n l y means transfer of u n i t s to an
'skill-formation' a m o n g the merely to d i r e c t investment of such
uncongenial atmosphere unless it is
r u r a l people g e n e r a l l y , and items as f a c t o r y accommodation,
preceded by a massive p r o g r a m m e
among rural artisans in roads a n d c o m m u n i c a t i o n facilities-
of d u p l i c a t i n g these e x t e r n a l econo-
p a r t i c u l a r , so t h a t m o r e p r o - common production and industry-
mies at the new locations.
ductive, modern techniques f a c i l i t y centres, power s u p p l y a n d so
are popularised in rural In this context large-scale units on. T h e y also refer to i n d i r e c t yet
areas, are m o r e amenable to dispersal, t a n g i b l e items of e x p e n d i t u r e such

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A u g u s t 27, 1960 THE ECONOMIC WEEKLY

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THE ECONOMIC WEEKLY A u g u s t 27, 1960

as outlays on town-planning, p r o v i - should be possible to locate certain n i n g the possibilities of achieving


sion of d r i n k i n g water, sanitary faci- types and scales of industrial orga- the desired results in alternative
lities and other social overheads nisation, at such centres, the charac- forms w i t h i n the given volume of
l i k e schools, hospitals, recreational teristics of the area must be such outlay, needs to be explored. In
facilities, residential quarters and a as to absorb the benefits of their any case, this is an issue w h i c h should
host of other items w h i c h together location in terms of employment be subjected to searching analysis,
ensure an amenable g r o u n d for the among others. T h i s presupposes, balancing the p r o b a b l e social and
sustenance of an i n d u s t r i a l town- therefore, an assessment of the t y p e economic returns in terms of the
ship. of labour available for employment effective utilisation of resources on
External economies in the 'agglo- in terms of technical s k i l l and the one h a n d and the probable m a r g i -
merated' centres are credited not t r a i n i n g , backed by a positive pro- nal economic and social returns in
o n l y w i t h the fostering of a r a p i d gramme to t r a i n them up to be alternative outlets on the other, for
rate of i n d u s t r i a l g r o w t h hut also, employable. T h i s apart, there is a given volume of investment.
of raising, in the process, the aggre- also need f o r an assessment of the
gate social p r o d u c t i v i t y of the com- type, q u a n t u m and q u a l i t y of v a r i - SKILL FORMATION
m u n i t y . T h i s is corroborated by ous raw materials and other resour- A programme for 'skill-formation'
the history of the industrial evolu- ces locally available so that a among the r u r a l populace in general
tion of all industrialised countries in matching of area resources could and among r u r a l artisans in particu-
the w o r l d . Increased social produc- a p p r o p r i a t e l y be undertaken in con- lar is regarded as an essential pre-
t i v i t y does contribute a distinctive sonance w i t h the industry-potential requisite for a successful p r o g r a m m e
f o r m of 'return 1 . If tools c o u l d be of the area.
of r u r a l i n d u s t r i a l i s a t i o n . It is con-
perfected to measure the various sidered indispensable,, first, f o r over-
phases of such ' r e t u r n in relation to FULLER UTILISATION
coming the inherited social r i g i d i -
'agglomeration" costs, it could be Such an assessment of area ties and i m m o b i l i t i e s a m o n g the r u r a l
seen that even h e i r the law of characteristics in reference to re- masses, thus creating the necessary
d i m i n i s h i n g returns o p e r a t e s . T h i s source configuration w i l l also be conditions for an integrated develop-
would undoubtedly be a valuable helpful in h i g h l i g h t i n g their present ment of the people and the area.
source of guidance to the p l a n n i n g level of exploitation. This would Secondly, and that too more speci-
authorities. facilitate an estimation of the under- ficallv w i t h rural artisans, it will
Present knowledge of the econo- utilised resources of all sorts. prove to be an important agent in
mics of agglomeration, however, Objective ( 3 ) seeks the effective ex- rendering them more productive at
does not provide Us w i t h any clue p l o i t a t i o n of u n d e r u t i l i s e d resour-
the given technological levels and
to various phases vis-a-vis the social ces such as i n d u s t r i a l raw materials
thus finally enabling them to reorient
cost and return. Perhaps, we shall based on agriculture and forestry,
themselves into viable small-scale
have to contend w i t h posing the mineral and other resources of
units at higher levels of technology.
problem in an altered f o r m of 'allo- geological o r i g i n and the like w h i c h
The history of i n d u s t r i a l l y developed
cation-choice' and seek answers to may not be effectiveiy used at the
countries of the w o r l d shows that pro-
such questions as the relative pro- moment. T h i s refers also to the
gressive artisans were an important
d u c t i v i t y of a given volume of out- fuller utilisation of basic overheads
factor in fostering technological ad-
lay in existing cities and dispersed already created in the area such as
vance and increased p r o d u c t i v i t y in
centres in terms of the rate, of electric power, w h i c h may be pre-
the evolutionary phases of these so-
industrial g r o w t h and increase in sently under-utilised or seasonally
cieties. Their potential was f u l l y inte-
employment opportunities. utilised, either in a g r i c u l t u r a l opera-
grated and exploited by a p p r o p r i a t e
AREA RESOURCES tions or in seasonal industries l i k e
measures designed to stimulate their
the g i n n i n g and processing of cotton.
Another i m p o r t a n t objective of a inventive capacity. dexterity of
pressing of oilseeds or other agri-
p r o g r a m m e of r u r a l industrialisa- w o r k m a n s h i p and a b i l i t y f o r i m p r o v -
culture-based industries. W i t h the
tion is the creation of employment ed industrial designing.
evolution of measures for the f u l l e r
opportunities in chronic pockets of
u t i l i s a t i o n of these under-utilised T h e anomalous situation observed
unemployment. The assumption is
resources, avenues will also be earlier in specific areas w h i c h are
that the existing r u r a l economy is
created for the f u l l e r utilisation of not able to benefit f r o m the location
generally of the 'subsistence' type,
the seasonally unemployed and of industries w i l l be largely correct-
characterised by disguised and open
under-employed r u r a l labour. ed by such a p r o g r a m m e of general
unemployment. Development of i n -
dustries in such areas, it is believed, It is, however, evident that indus- s k i l l f o r m a t i o n . Sustained mobile
w o u l d not only provide gainful i n - tries sought to be developed as demonstrations. " i n - p l a n f t r a i n i n g
dustrial employment to the un- counter-cyclical to agriculture should facilities and audio-visual displays,
employed and 'redundant' labour, in themselves have alternate peak coupled w i t h basic and multi-purpose
but. also tend to increase the pro- and slack phases. Or such indus- technical schools and polytechnics,
d u c t i v i t y of the a g r i c u l t u r a l econo- tries w i l l have to be of a relatively should go a l o n g way in assisting
m \ \ It would also obviously reverse labour-intensive type, so that the this process. A l i b e r a l and realistic
the tide of rural exodus. m a r g i n a l p r o d u c t i v i t y of the capital p r o g r a m m e for the grant of stipends,
One may point out that it is f u t i l e invested in them does not prove I'n- hostel facilities and freeships in
to expect that the areas characterised remuneraiive in terms of returns on a p p r o p r i a t e cases must also f o r m an
by severe unemployment w i l l also be investment. An element of subsidy integral part of the programme.
suitable centres for i n d u s t r i a l loca- may reasonably be expected to be in- LOCAL SAVINGS
t i o n . Besides, as is evident f r o m volved here, but purely f r o m the lar- A positive programme for the
our earlier discussion, even if it ger strategy of developmental plan- p r o m o t i o n of industries, especially
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A u g u s t 2 7 , 1960 THE ECONOMIC WEEKLY

of the small-scale t y p e , at localised A two-pronged attack on the p r o - ous districts may be desirable. In
centres, has the added m e r i t of m o b i - blem is conceivable. On the one any case an assessment of these fac-
lising local savings. Experience in h a n d , consistent w i t h area charac- tors should n o r m a l l y precede the
other d e v e l o p i n g economies of the teristics, evolution of modern indus- d e t e r m i n a t i o n of the area of opera-
West Asian and F a r Eastern coun- t r i a l lines can be i n i t i a t e d at suitable tion.
tries, as in our o w n , suggests that centres; on the other, the t r a d i t i o n a l
local small investors can be persuaded modes of i n d u s t r i a l activities cam be
to invest in local i n d u s t r i a l projects gradually reoriented, with appro- M a n u f a c t u r e of Diesel Rail
because they can observe, and also priate State help f o r o v e r c o m i n g Cars
p a r t i c i p a t e i n , the c o n t r o l l i n g and o p e r a t i o n a l problems and effecting THE question of manufacturing
organisational functions of these lo- positive technological improvements. diesel r a i l cars in the I n t e g r a l
cal projects d i r e c t l y and i n t i m a t e l y , These two aspects should be viewed Coach F a c t o r y , P e r a m b u r , is under
in the absence of local projects, these as an integral part of the overall consideration, but no f o r m a l order
smalt investors are likely either to problem of industrialisation and lias been placed yet. T h i s was re-
h o a r d money, seek m o r e tangible and be co-ordinated as such. vealed by S h r i Shah Nawaz K h a n ,
stable investment outlets as in g o l d
D e p u t y M i n i s t e r of Railways, in the
or real estate or spend on items of EFFECTIVE AREA
Lok Sabha last week. He said that
conspicuous c o n s u m p t i o n . There is no u n a n i m i t y of view on the tentative proposals f o r the T h i r d
As a result of the o p e r a t i o n of the size of the area-unit to f o r m an Five Year Plan of the Railways en-
Plan schemes, there is evidence that effective base for the i n i t i a t i o n of a visaged procurement, of 197 diesel
an increasing n u m b e r of small inves- programme of rural industrialisa- r a i l cars of the f o l l o w i n g gauges:
tors show i n c l i n a t i o n to invest in tion. However. it is generally
67 broad gauge at. an estimated
local industrial projects. Surely, agreed that, by and large, the area
cost of Rs 6.4 lakhs per u n i t ;
any additional social investment of development should be adequate
120 metre gauge at an estimated
w h i c h holds prospects of a t t r a c t i n g enough to sustain i n d u s t r i a l g r o w t h
cost per u n i t of Rs 3.8 l a k h s ; and
significant new p r i v a t e capital in its of an a p p r o p r i a t e order through
10 n a r r o w gauge cars at an esti-
wake can be regarded as sound i n - local raw materials, local skill
mated cost of Rs 2.5 lakhs per u n i t .
vestment even f r o m the angle of and local d e m a n d . The concept
All these rail cars are proposed to
strict 'cost-retiinv considerations. of a self-sufficient village, sus-
be m a n u f a c t u r e d in the Integral
For, the c u m u l a t i v e g r o w t h poten- tained and balanced by the deve-
Coach Factory. Designs to suit i n d i -
t i a l of the economy f r o m such in- lopment of n o n - a g r i c u l t u r a l occupa-
genous m a n u f a c t u r e are under pre-
vestment w i l l be sufficiently higher tions, is speedily (and perhaps hap-
paration.
and the resultant returns in terms p i l y ) being discarded. T h e forces
of increased employment and pro- released by the process of economic
d u c t i o n , significantly r e w a r d i n g . development, the new trends in de-
m a n d , trade and commerce, rapid
COORDINATED PROGRAMME improvements in t r a n s p o r t and com-
F r o m this discussion of the objec- m u n i c a t i o n have tended to expose
tives and their i m p l i c a t i o n s , certain the so-called 'closed' village economy
broad features of the pattern of a to externa! influences. The attempt
programme for rural industrialisa- now is to integrate the economy of
tion can be deduced, ft is borne a contiguous block of r u r a l areas
out by the discussion that dispersal w i t h local urban centres, so that
of i n d u s t r i a l locations in r u r a l areas together they may constitute an ef-
no! only should generally conform fective area of o p e r a t i o n f o r inte-
to the resource-configuration of the grated development. The urban
area, but also be preceded by vigo- areas are visualised as essential
rous p r o g r a m m e s f o r the p r o v i s i o n nuclei f o r the surrounding rural
of social and economic overheads areas, serving as seats of organisa-
and s k i l l - f o r m a t i o n . The p r o g r a m m e , t i o n , outlets and channels of market
besides, should be conceived and f o r i n d u s t r i a l and a g r i c u l t u r a l p r o -
i m p l e m e n t e d as an integrated and duce, sources of raw m a t e r i a l sup-
coordinated scheme of development ply and as centres f o r the dissemi-
of the selected rural areas. The nation of technical and technological
t y p e of industries sought to be deve- know-how.
loped should n o r m a l l y c o n f o r m to,
and be consistent w i t h , the socio-eco- As to how large this 'effective
nomic content of the area concern- area' should be is not a matter to
ed. T h o u g h no p r e c o n c e i v e d for- be decided by considerations of phy-
m u l a o f technology and p r o d u c t i v i t y sical extent but by such situations
should bias the p r o g r a m m e in refe- as resource-configuration, the nords
rence to p a r t i c u l a r areas, neverthe- of an 'economic m a r k e t area', gene-
less, f r o m the v i e w p o i n t of expedi- ral levels of income and standards
ency and objective of development, of l i v i n g and of skill and social and
it is necessary to a i m at relatively c u l t u r a l backgrounds. For e x a m p l e ,
higher f o r m s and levels of technolo- in a few cases, a revenue tehsil may
gical activities. B u t this should be be considered a ' v i a b l e ' area in this
g r a d u a l l y and p a t i e n t l y w o r k e d out. sense; but in others, a few c o n t i g u -

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